January 27, 2005

The head of European no-frills airline Ryanair said on Thursday that while second-half 2004 revenues per passenger declined slightly less than expected, the overall outlook for 2005 was ``awful.``

Europe`s biggest low-fare carrier in November revised its forecast for yields -- average revenues per passenger -- to a decline of 5 to 10 percent in the second half from a previous estimate of 10 to 20 percent.

``On Monday, we`ll be updating that and it`s a fraction better than that original guidance,`` Michael O`Leary said at an analyst conference in New York. ``Why? Partially because the bloodbath is continuing in Europe.``

``Some airlines are going bust, other airlines are pulling capacity out of markets where they compete with us,`` he said. ``We`re not finding the yield competition to be as bad as we originally thought it was.``

But he reiterated that the outlook for 2005 was ``awful.`` ``Fares are going to get lower and lower,`` said O`Leary.

After making a name for itself by competing aggressively on short-haul routes between European countries, he said Ryanair is now eyeing some European airlines` home turf.

``At some point we will do domestic routes in Italy and other European countries,`` he said. ``I think you`ll see announced some domestic routes in Italy within the next one to two years.``

A Ryanair-initiated dogfight would mean more bad news for beleaguered Italian state-controlled airline Alitalia, whose domestic flights are a key source of profit even as it struggles with competition on international routes.

In a talk characteristically spiced with humor and profanity, O`Leary also said Ryanair`s experiment in offering in-flight entertainment has so far been ``a bit disappointing.``

The laptop-sized devices allowing passengers to watch movies and other entertainment initially only offered English-language programming, which limited their popularity.

They now offer five different languages, but the system`s future is still ``up in the air,`` he said, reiterating that he ultimately hopes to offer passengers in-flight gambling.